Despite the rally on Wednesday, the hotter trends in the overnight data is still not hot enough to impress and suggests there is still a bearish bias in the market. The rally we say yesterday was probably driven by short-covering due to the slight change in the weather pattern and grossly oversold technical indicators.

Natural gas futures are inching higher early Thursday after posting a strong short-covering rally on Wednesday ahead of today’s weekly government storage report. Yesterday’s rally was fueled by new forecasts calling for hotter temperatures with some models showing lower chances of the cooling that had been expected. Signs of increasing demand that should tighten the balance outlook also underpinned prices.

Prices shot higher shortly after the opening on Wednesday after Bespoke Weather Services said its models are “no longer showing nearly as much cooling” moving into the eastern half of the Lower 48 late next week. The forecaster also said the change in the forecast should lead to a “notable jump” in forecast gas-weighted degree days (GWDD) based on the latest weather data.

Bespoke went on to day, “We still believe anomalous heat can continue as we move near and just beyond mid-August, with rather persistent blocking signal favoring hotter risks across the southern half of the nation, likely giving regions such as Texas their hottest weather of the summer in the current medium-range time frame,” including highs climbing to near or just above triple digits on the hottest days.”

Bespoke also noted balances strengthened in the latest data.

The forecaster said, power burns are “seeing more high-side revisions in today’s data, climbing to their highest absolute level yet yesterday, despite lower GWDDs versus the heat we saw a couple of weeks ago.” Bespoke further added, “We expect strength to continue the rest of this week given a lower wind pattern in place…the totality of the data still leads us to believe there is little reason to move lower, pending cash prices” and this week’s storage data.

NatGasWeather said on Wednesday, “Most of the overnight data was slightly hotter trending to add a couple CDDs, although still not nearly hot enough through August 11-12. There’s still potential for a little hotter pattern arriving over the eastern US August 12-15, but overall, even with the slight hotter overnight trends, the coming pattern still isn’t impressive due to numerous weather systems with showers and cooling expected to sweep across the Midwest and east-central US, including at times deep into the Southeast.

So, even though recent data again suggested a hotter pattern has potential to arrive over the Midwest and East August 12-13th, the data isn’t convincing and needs more evidence if the markets are to fully expect it. With that said, the pattern is likely to be viewed as a little hotter trending beginning August 12-13 and could be reason if prices added a couple cents.”

Last year the EIA recorded a 31 Bcf injection for the period, and the five-year average build is 37 Bcf.

Daily Forecast

Despite the rally on Wednesday, the hotter trends in the overnight data is still not hot enough to impress and suggests there is still a bearish bias in the market. The rally we say yesterday was probably driven by short-covering due to the slight change in the weather pattern and grossly oversold technical indicators.

The short-term range is $2.305 to $2.201. The market is currently trading on the strong side of its 50% to 61.8% retracement zone at $2.227 to $2.203. This zone has to hold as support or prices will continue lower.

The intermediate range is $2.476 to $2.101. Its retracement zone at $2.288 to $2.332 is the next upside target. Sellers could come in on a test of this area especially against the main top at $2.305.

I could get excited about the upside if buyers can take out $2.332.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.

RISK DISCLAIMER

This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.